SK Brothers Builders and Developers Limited v Redhill Developments (NZ) Limited
[2009] NZCA 599
•15 December 2009
IN THE COURT OF APPEAL OF NEW ZEALAND
CA102/2009
[2009] NZCA 599BETWEENSK BROTHERS BUILDERS AND DEVELOPERS LIMITED
Appellant
ANDREDHILL DEVELOPMENTS (NZ) LIMITED
Respondent
Hearing:20 October 2009
Court:Arnold, Randerson and Allan JJ
Counsel:J D Atkinson and T E Futter for Appellant
S Price and N Jones for Respondent
Judgment:15 December 2009 at 3.30 pm
JUDGMENT OF THE COURT
A The appeal is allowed.
BThe order granting summary judgment is quashed and the proceeding is remitted to the High Court for trial.
CThe respondent must pay the appellant costs for a standard appeal on a band A basis and usual disbursements.
REASONS OF THE COURT
(Given by Allan J)
[1] In September 2007 the appellant entered into three agreements to purchase 17 lots in a residential subdivision undertaken by the respondent. In mid–2008 the appellant, when called upon to settle, declined to do so. It alleged that there had been a material misrepresentation by the respondent about the location and contour of the lots concerned before the appellant entered into the agreements.
[2] After considerable negotiation the respondent issued settlement notices and subsequently cancelled the agreements, save in respect of one lot which the appellant had on-sold, and for which it duly settled with the respondent. The remaining lots were resold by the respondent, which later issued proceedings in order to recover its losses after resale. The respondent applied for summary judgment for an amended figure of $445,356.80. The application was heard by Associate Judge Abbott: HC AK CIV 2008-404-6510 3 February 2009.
[3] The appellant raised two defences. First, it contended that the alleged misrepresentations afforded a defence to the respondent’s claim. Second, it argued that, during the course of negotiations, the parties had entered into a binding settlement which absolved the appellant from any further liability under the agreements.
[4] The Associate Judge found against the appellant. On the misrepresentation argument, he decided that the evidence was too vague to establish a representation as to an existing fact. He also found that the respondent was entitled to rely upon the exclusionary provisions of the agreement in order to avoid liability, even if a qualifying representation had been established. Clause 18 of the agreements contained an acknowledgement that the appellant had purchased in reliance on its own inspection, and that there were no vendor warranties or representations other than as contained in the agreement. Clause 24 of the agreements provided that the written agreement constituted the entire bargain between the parties, and that no earlier representation had any force or effect as from the date of the agreement.
[5] The Associate Judge also concluded that there had been no binding settlement of the dispute between the appellant and the respondent. Accordingly, the respondent succeeded in obtaining judgment for the amount sought. From that judgment the appellant appeals.
Background
[6] The appellant and the respondent are both established business organisations. The respondent is engaged in property development on a relatively large scale. Similarly, the appellant has significant property interests. Senior management on both sides are Indian. Written communications between the parties were in English, but oral discussions (including the representations at issue) were conducted in Hindi.
[7] In March 2007, the appellant purchased 13 lots in Stage 3 of a significant subdivision undertaken by the respondent at Redhill near Papakura. Those contractual arrangements were carried into effect without undue difficulty. No doubt those early satisfactory dealings created a favourable climate for further purchases by the appellant, which was approached in September 2007 by the respondent in order to ascertain whether there was interest in the purchase of lots in Stage 4.
[8] On 9 September 2007, the parties met at the subdivision in order to inspect additional land which the respondent was offering for purchase. Those then present included Mr Sami, of the respondent, and Messrs Dutt and Lal, for the appellant. Messrs Dutt and Sami are the senior figures within the respective companies. They gathered on lot 232, which was among those purchased by the appellant as part of Stage 3. It afforded a partial view of aspects of Stage 4 of the subdivision.
[9] Mr Lal is the administration manager for the appellant. In his affidavit he described what occurred when the parties met:
5.On a Sunday 9th September 2007 there was a meeting at the site of the Redhill subdivision. Present were Mr Dutt and me, our accountant Mr Jitendra Patel (who accompanied us to the site in our car), Mr Arjun Sami and a builder, Mr Ruben Mahabir. They came to the site in Mr Ruben’s vehicle. We met at the corner of Kereru Rise and Kirikiri Drive adjacent to lot 232 shown on the subdivisional plan annexed hereto and marked with the letter “A”. Lot 232 was one of the 13 lots that had earlier been purchased by the defendant from Stage 3 of the Redhill subdivision.
6.From there we looked in a westerly direction down towards an area where there was a good deal of earthmoving work going on. Mr Sami pointed towards the land where the earthmoving machines were working and indicated that he was selling sections there. He indicated that those sections were, if anything of a better contour than the sections we had purchased in Stage 3. There were discussions about the number of sections involved and their locations. We were not able to inspect the sections. The boundaries were not marked and the roading was not done. Annexed as exhibit “B” is a photograph taken from lot 232 showing in outline the area where the earthmoving machines were working.
7.At that time the existing road finished at the end of the light grey portion of roading shown on exhibit “A”. There was no sealed road past there. What we saw was a fairly evenly sloping area which appeared to be similar to or flatter in contour to the area where we were standing containing the sections that the defendant had already purchased.
8.Mr Dutt remarked on the fact that although the area shown to us by Mr Sami appeared to be flatter than the sections we had already purchased the lot prices would be cheaper as indicated by Mr Sami.
9.We only spent a short time talking about it at the subdivision. The weather was unpleasantly wet and cold. We continued our conversation in a coffee shop about 15 minutes drive away. We looked at a large plan which we spread out on the seat of Mr Ruben’s vehicle. It was similar to exhibit “A” but coloured. Mr Sami pointed out the area adjacent to the western side of the dark coloured part of the plan and said that that was where we had seen the contractors’ vehicles working and that was where the sections were that he wanted to sell. No discussions took place about which individual lots would be acquired.
10.The consequence of that meeting was that we understood that the area shown to us contained the sections that were to be sold and that the contours were as good as or better than the contours of the property we had purchased in March.
[10] Mr Lal referred in his evidence to exhibit B, being a photograph taken from lot 232 and showing in outline the area where certain earthmoving machines were in operation. The photograph was taken many months after the meeting between the parties, at a time when all of the roading was complete. It is of some assistance in that it helps to identify the general area in which the earthmoving machinery was situated at the time of the discussion. It also depicts the relatively flat contour of the roadway, but care is obviously needed in respect of the weight to be attached to the photograph because it was taken so long after the meeting and cannot depict what the parties saw on 9 September 2007.
[11] Thereafter matters moved swiftly. On the following day, 10 September 2007, a manager employed by the respondent, Mr Shailendra Kewal, visited the appellant’s office. Mr Lal gave evidence of what occurred during and following that visit:
12.Shailendra came to our office on Monday 10 September. It was about 10am. He had a site plan similar to exhibit “A”. Using the plan he showed us the lots which were available. These are listed in “the second agreement” referred to in the plaintiff’s affidavit. Shailendra quoted the price of each lot at $205,000 which he said was offered by Mr Sami. He said that Mr Sami considered Mr Dutt to be his biggest customer with a good potential for future business and that Mr Sami would always look after Mr Dutt. Mr Dutt accepted the prices at $205,000 per lot considering that they were flatter sections with better views than those purchased from Stage 3 at $210,000 each.
13.Shailendra also mentioned that in addition to the lots we were proposing to buy there were only four other lots in the entire subdivision that were still available for sale. He pointed them out to us as lots 115, 126, 127 and 146 on the plan. These are on the opposite side of Kale Place to the lots we had initially been discussing. He said these were flat sections with better views than the ones we had already indicated we would buy. They were being offered for $205,000. Mr Dutt said that if they were as good as the ones we had just agreed to buy he would take them at that price. After finalising the lot numbers and the price Mr Shailendra said he would be back as soon as he had prepared an agreement.
14.When Shailendra returned to our office on Wednesday 12 September he had three agreements with him. One was the agreement for the thirteen sections which the plaintiff’s affidavit refers to as the “second agreement”. Another was the agreement dated 11 September 2007 for the additional three sections (lots 126, 127 and 146) which the plaintiff’s affidavit refers to as the “first agreement”. The third agreement dated 11 September 2007 was for lot 115. (Annexed as Exhibit “C”). All three agreements were signed by Mr Dutt on 12 September 2007.
[12] The first of the three agreements between the parties related to lots 126, 127 and 146. The agreement provided for a total purchase price of $615,000, or $205,000 for each lot. A deposit of $30,750 was payable.
[13] The second agreement was for lots 3–16 (excluding lot 14). Again the contract price was $205,000 for each lot, making a total purchase price of $2,665,000. A deposit of $133,250 was payable.
[14] The third agreement related to lot 115 (in Stage 3) alone. It provided for a purchase price of $205,000 with a deposit of $20,500.
[15] There matters rested for some time. In early April 2008, Mr Lal noticed in the course of a visit to the subdivision that a newly sealed road had been formed on the land which he had understood to have been the location of the lots purchased by the appellant. He reported his concern to Mr Dutt, who was out of New Zealand at the time. Mr Dutt returned to New Zealand in June. On 12 June 2008 Mr Lal and Mr Dutt inspected the site. They discovered that the lots the appellant had purchased, or at least most of them, were steeply sloping. Mr Lal says in his affidavit that:
Although the road itself is reasonably flat, the land slopes steeply down from it to the extent that vehicular access across the building lots is very difficult and possibly dangerous. The sections are nothing like what was represented to us. They are much steeper than the sections we had earlier purchased (in Stage 3) with the consequence that access will be a great deal more difficult and expensive to achieve and building platforms will be expensive and difficult to create, possibly involving pole housing.
[16] The steeply contoured nature of most of the lots is confirmed by a registered valuer, Mr M Hardie, in a report dated 23 July 2008 to ASB Bank Ltd.
[17] Mr Dutt sent an email to Mr Sami of the respondent on 12 June 2008. It reads:
Dear Mr Arjun Sami,
Further to my email of 9th June to yourself, I need to inform you that it may not be possible for me to agree on a settlement.
I have only been able to physically see those sections in Redhill this afternoon after almost eight months since we met there last in September 2007. As you know I spend most of my time in India and Dubai office and only take a very short trip to NZ so I just thought to take a quick trip today to Redhill at least to see these sections once after the completion of the subdivision. I am very disappointed to inform you those sections which I have purchased are in no way near to what I was being offered and how it was explained to me firsthand by you. You must remember that on 9th September 2007 you first offered me to purchase lots 115, 116 and 117 of your stage 3 development. After physically seeing these sections at that time, I very clearly told you and Shailendra Kewal that I am not interested in buying sloped sections at any cost. Out of these 3 sections you had offered I only picked lot 115 because it was less sloped than lot 116 and 117.
At the same time you offered me to purchase additional 16 lots from your stage 4 subdivision which probably had just started at that time. Since there was no through road to go and physically see these sections, you gave me an indication of the whereabouts from the position of our existing 13 sections. Once again I asked you about the contour of these additional 16 lots and you confirmed that after the completion of that stage of subdivision it will be less sloped than those 13 lots from stage 3 subdivision which I have already settled earlier. On this basis, I agreed to purchase these additional 16 lots and an agreement was signed in our office within a couple of days.
Arjun, I have a very good business relationship with you and I wish to maintain this bond till the end. You must admit this that I have bought these additional sections on our friendship basis and on recommendation of your companion Mr Jitendra Patel. I could have invested this sum of money elsewhere but since you personally proposed me through Mr Patel, I just could not disregard it and had accepted your offer.
In light of your circumstances and your commitment with your bank and in good faith, I wish to offer you the following options:
1.Either cancel this agreement and I am happy to utilise this sum of approx 3.2 million into your other projects or;
2.Either cancel this agreement and you provide me with 16 lots in Redhill which are better flat sections (similar to those 13 lots purchased earlier) as you had represented to me on day one or;
3.Mutually cancel this agreement return my deposit and we walk away.
Arjun, I am still happy to do future business with you and I can even assist you with substantial amount of finance into your future projects. But before we go any further we need to sort out the matter as raised above.
Kind regards,
Sunil Dutt
[18] On 16 June 2008 Mr Lal, along with Rajeev Kumar (Mr Dutt’s brother), met Mr Sami in the respondent’s office. On that occasion, Mr Sami handed a written proposal to the appellant’s representatives. It reads:
Dear Sunil bhai,
Thank you for the time and meetings with regards to various project opportunities and getting to understand each other’s business better. I am sure that there is a common synergy whereby we can see through some great projects together.
Redhill
Subsequent to our meetings and looking back at our business position, it would be in our best interest if the agreements in Redhill sections are settled. Appreciating that the sections are contoured, we ourselves were not aware that they would turnout the way they have. We propose that you proceed to settle for these committed sections and we commit to continue marketing these sections as we have been doing so for the entire subdivision. I have now checked with my brother for lots 226, 227 and 228 and he is happy to sell them at $220k each. Let me know of your thought on the same. Upon your confirmation I will instruct Radhe accordingly.
Hamilton Project x 7
The properties around our project are selling well over $500k and anticipate higher values as the project progresses. We can look at a wholesale/bulk price at $480k. This is purely based on the assumption that upon agreeing to this, sections will be settled immediately and balance 5 working days from issue of code compliance certificate. Section prices average off to approximately $205k. We confirm that each of the 7 properties will have HNZ leases of 5x5 years and rental of $450.00 per week. There is a property management fee deductible at 8%.
Buckland Road Investment – Pukekohe
As discussed and confirmed by yourself, I am currently liaising with Radhe on how we can structure this proposition. Thank you for confirming your 25% stake hold in this venture. I will get back to you on the finer details of this project.
Sunil bhai, as mentioned above, I can see a long term alignment between our two organisations and would be great if you can support us with the Redhill sections. It is very critical for us as an organisation that we conclude this project earlier than later.
Let me know of your thoughts on the above at the earliest as it will require to restrategize on how we proceed with our selling and marketing of the respective projects.
Kind regards
Arjun Sami
[19] Although apparently willing to engage in further discussions aimed at involving the appellant in future projects, the respondent contemporaneously took a hard line with the appellant, issuing settlement notices on 20 June 2008 (just four days after Mr Sami’s letter) requiring the appellant to complete settlement of the agreements within 12 working days after the date of service. In an email sent to Mr Sami on 21 June 2008, Mr Dutt complained that:
On one hand you are amicably trying to resolve the Redhill Sections issues with me and on the other you are sending Settlement Notice through your Lawyers. This is not a fair practice. Kindly let me know what is your decision with the Redhill Sections and how are we suppose[d] to resolve the issues?
[20] There was further correspondence but no resolution. The appellant declined to settle. On 23 July 2008 the respondent cancelled the agreements and purported to forfeit the deposits. On the following day, 24 July 2008, the respondent resold all of the lots with one exception to a secured creditor for $170,000 each, pursuant to an option created as part of its security arrangements. That led to a significant shortfall which the respondent now seeks to recover in this proceeding.
[21] Wide-ranging negotiations followed. The respondent endeavoured to involve the appellant in some of its other development projects. Although the appellant did display some interest in one or two such proposals, nothing was agreed for some time.
[22] However, on 12 November 2008, Mr Dutt and Mr Sami signed a document which, the appellant contends, settled its liability (if any) to the respondent. By that time, this proceeding had been commenced.
The High Court judgment
[23] Associate Judge Abbott considered that, insofar as Mr Sami’s representation was concerned with contours, it was not actionable because it related to a future state of affairs, namely the eventual subdivisional contour. A representation as to a future state of affairs is not actionable and will amount to a mere expression of opinion only, unless coupled with a false assertion that it is an honestly held belief: Ware v Johnson [1984] 2 NZLR 518 at 537 (HC).
[24] The judgment refers to Mr Dutt’s comment that he had been unable to inspect the purchased lots because the sections were “not developed”, and to Mr Sami’s response to the effect that he was not aware that the contours would turn out as they did: at [25]. The Associate Judge held that there was no suggestion of absence of genuine belief on Mr Sami’s part; consequently the appellant could not maintain a cause of action in respect of what was represented as to the final contour of the lots.
[25] The Associate Judge was critical of the absence of detail in the appellant’s evidence about the alleged misrepresentation. He noted that the appellant was already familiar with the subdivision, having earlier bought a number of lots in Stage 3, had a copy of the plan showing all of the lots (a copy of the plan had been attached to the executed agreement), and must have been aware that the lots being purchased “ … were in a general sense beyond the allegedly represented area. They could well be encompassed by a general indication”: at [27]. The Associate Judge was influenced by the fact that several lots and two roads lay between the point at which the parties were standing on lot 232 and portions of the land which the appellant was to purchase. He concluded at [28]:
The evidence is vague at best and not clear enough, to be a representation as to existing fact given the undeveloped part of the subdivision. It is also evidence as to where the lots are likely to be (once pegged) – a future event.
[26] The Associate Judge also found against the appellant on the respondent’s alternative argument that the parties had excluded any liability on the respondent’s part. Clause 18.1 of the agreements provided:
The Purchaser acknowledges the Purchaser is purchasing the property based on the Purchaser’s own inspection, inquiries and professional advice, there being no warranties or representations, express or implied, by the vendor or the vendor’s agents other than as contained in this agreement, all such information being intended solely as a guide to prospective Purchaser’s potential use of the property. The Purchaser acknowledges none of the information provided by the vendor or the vendor’s agents is to be construed as a warranty or representation by the vendor that the property shall be in accordance with the information provided.
[27] Clause 24.1 of the agreement provided:
This agreement constitutes the entire agreement between the parties and no earlier representation, warrant[y] or agreement in relation to any matter dealt with in this agreement has any force or effect from the date of this agreement.
[28] Having considered s 4 of the Contractual Remedies Act 1979 and the leading authorities, the Associate Judge concluded that cl 18.1 and 24.1 were binding upon the appellant.
[29] Finally, he held that the appellant was unable to escape liability by relying upon the settlement agreement of 12 November 2008, because the respondent was not a party to the agreement, and it was subject to a finance condition which was never fulfilled.
Contour and location
[30] The Associate Judge dealt with Mr Sami’s representations about final contour and as to the location of the relevant lots as quite separate issues. We consider them to be linked. Although the appellant was a purchaser of Stage 3 lots and had a plan of the subdivision available to it at the meeting of 9 September 2007, the evidence is that the lots in Stage 4 were not pegged at that time. Neither was road access available. Earthworks were in train, and so the parties had no alternative but to inspect from a distance the land to be purchased by the appellant.
[31] The Associate Judge also considered the appellant’s evidence to be too vague and general to support a misrepresentation defence. We take a somewhat different view. The boundaries of the various lots were fixed, in the sense that they were marked on the plan, but they were not ascertainable on the ground because the lots were not pegged and earthworks were continuing. In those circumstances, any representation made on behalf of the respondent as to location and contour must have been of vital significance to the appellant. The respondent knew that the appellant would be reselling the lots for residential purposes and so was seeking lots that were viable building sites. An assurance that the lots to be purchased were: “if anything of a better contour than the sections we have purchased in stage 3” must, to Mr Sami’s knowledge, have been of central importance to the appellant. After all, the respondent could be expected to know precisely where the lots in question were to be located and, in consequence, what the contour of those sections would be.
[32] On Mr Lal’s evidence, Mr Sami’s assurances amounted to a representation that the lots were situated within the visible relatively level area upon which earthworks were being carried out; in other words, it was a representation as to an existing state of affairs.
[33] Subsequently it emerged that the lots (or at least most of them) did not enjoy a relatively level contour at all. Rather, they were situated beyond the area of the earthworks on steeply sloping land out of sight of those who gathered on lot 232.
[34] For present purposes the Court is entitled to proceed on the basis of Mr Lal’s evidence because the appellant has chosen not to respond to it. Mr Sami simply says:
I deny many of the allegations made by Sanjay Lal and Sunil Dutt. However, for present purposes, I limit my reply to the following.
[35] Mr Sami does not comment at all upon Mr Lal’s account of the representations allegedly made to the appellant on 9 September 2007.
[36] Although Mr Sami has refrained from placing before the Court his account of what was said to the appellant on that day, it is arguable that there may be an element of concession in Mr Sami’s letter of 16 June 2008:
Appreciating that the sections are contoured, we ourselves were not aware that they would [turn out] the way they have.
[37] In summary, we consider the questions of location and contour to be interwoven. A representation as to the location of the relevant lots concerned an existing fact (the plan already being in existence). Moreover, it is not an answer to the appellant’s case to say that the representation was too vague and general. Given the respondent’s assumed knowledge of its own subdivision and the inability of the appellant to check lot location by reference to pegs or even to gain access to the area, a general assurance of the type alleged here was likely to be acted on and indeed, on the evidence, was intended to persuade the appellant to proceed.
The exclusion clauses
[38] If binding upon the appellant, cl 18.1 and 24.1 would preclude reliance by the appellant upon the alleged representations. But s 4 of the Contractual Remedies Act (the Act) empowers the Court to review any such exclusionary provision for the purpose of determining whether it is fair and reasonable that the provision should be conclusive between the parties.
[39] Section 4(1) of the Act provides:
4 Statements during negotiations for a contract
(1)If a contract, or any other document, contains a provision purporting to preclude a Court from inquiring into or determining the question—
(a)Whether a statement, promise, or undertaking was made or given, either in words or by conduct, in connection with or in the course of negotiations leading to the making of the contract; or
(b)Whether, if it was so made or given, it constituted a representation or a term of the contract; or
(c)Whether, if it was a representation, it was relied on—
the Court shall not, in any proceedings in relation to the contract, be precluded by that provision from inquiring into and determining any such question unless the Court considers that it is fair and reasonable that the provision should be conclusive between the parties, having regard to all the circumstances of the case, including the subject-matter and value of the transaction, the respective bargaining strengths of the parties, and the question whether any party was represented or advised by a solicitor at the time of the negotiations or at any other relevant time.
[40] The leading authority on the application of s 4(1) remains the decision of this Court in Brownlie v Shotover Mining Limited CA181/87 21 February 1992. In that case, McKay J, delivering the judgment of the Court, observed in respect of exclusionary clauses (at 31–32) that:
There can be nothing inherently unfair in such an exclusionary clause. It is highly desirable that written contracts should be so drawn as to state all the terms of the intended contract, and so avoid the uncertainties which can arise from allegations of verbal representations or collateral warranties. If parties have not agreed to include express warranties in their written contract, then it is reasonable for them to state expressly that verbal warranties are excluded. Other matters relevant under the section in determining whether it is fair and reasonable to enforce the clause include "all the circumstances of the case". This was a commercial contract between commercial parties each with separate legal advice. The subject matter and value of the transaction were sufficiently substantial to justify the expectation that each party would be familiar with its terms and intended to be bound by them. The respective bargaining strengths of the parties would not justify any special indulgence to either. Both parties were represented and advised by solicitors at the relevant time.
[41] In the present case the Associate Judge concluded that the appellant was bound by the exclusion clauses. He took into account three primary considerations at [35]:
a)This was a contract between experienced commercial parties;
b)The contracts involved a substantial sum (in excess of $3m) and followed a similarly substantial contract in March 2007; and
c)It was open to the appellant to make the agreements conditional on its ultimate satisfaction as to location and final contours, but it chose not to do so.
[42] Those are each undoubtedly factors of relevance, but we consider that there were countervailing factors that served to distinguish this case from the general run of contracts between commercial parties for the sale and purchase of land on a relatively large scale.
[43] First, there is Mr Dutt’s background. He was the senior figure and decision-maker in respect of the appellant’s New Zealand operations. He had had 20 years business experience in India and the Middle East before becoming involved in New Zealand in late 2006. Although he is able to read and write English with some proficiency, the evidence is that he is less comfortable when speaking English and prefers to converse in Hindi. That was why the pivotal discussions at the site on 9 September 2007 were conducted in that language.
[44] The language issue leads on to the second factor, namely the high degree of mutual trust and respect which plainly existed between Mr Dutt and Mr Sami. The email correspondence that passed between them during the period of their negotiations about this dispute is replete with assurances on either side of trust and a desire to secure an outcome that was positive and acceptable to both parties. Each appears to have set great store on the need for mutual confidence as to the underlying integrity of their business relationship.
[45] That consideration leads to a third factor. It is arguable that Mr Dutt was necessarily completely reliant on Mr Sami’s assurances about lot location and contour. The absence of boundary pegs and the ongoing earthworks in the vicinity might be thought to have effectively ruled out the option of an independent inspection by the appellant (for some of the lots at least). The assessment of these matters is, we think, a question for trial.
[46] It was against that important background that the parties came to document their transaction. Neither side used lawyers. Rather, Mr Kewal brought the three agreements to the appellant’s office on 12 September 2007. There were some negotiations over the deposit, which was reduced by agreement, but otherwise the appellant executed these long and detailed agreements without taking legal advice. Mr Lal says that they appeared to be in the same form as those which governed the earlier, trouble-free, transaction.
[47] It is an available inference that these parties regarded the written agreements as formalities, and that they placed much greater weight upon the integrity of the bargain at a personal level. To that extent, the case is distinguishable from those in which the terms of the contract were settled by negotiation with the assistance of legal advice on both sides.
[48] The weight to be attached to the relationship of Messrs Sami and Dutt, and to the absence of legal advice in an otherwise commercial setting, is we think a matter to be determined at trial. In this particular case, it is likely that a s 4 assessment will be greatly assisted by the advantage of seeing and hearing the witnesses.
[49] The Associate Judge was much influenced by the fact that the appellant had previous experience in the acquisition and development of land in New Zealand. He considered that the appellant must be taken to have known that it was entitled to take legal advice if it wished, before signing the agreement, and that the appellant was comfortable assessing the agreements and the associated risks for itself. Moreover, he inferred that the exclusion clauses relied upon by the respondent “would not be unfamiliar to [the appellant]”: at [38].
[50] It is undoubtedly true that the appellant has previously been a party to an agreement containing the same exclusion clauses as are relied upon by the respondent here. But that is simply a consideration to be taken into account against the background we have described. We note that the earlier transaction was carried into effect without problems of the sort that have arisen here. So the appellant would not have had occasion to examine the detail of the earlier agreement closely.
[51] In this particular case we think that a s 4 assessment can best be made after a trial Judge has had an opportunity to see and hear the witnesses. In so deciding we re-affirm the importance of what was said by McKay J in Brownlie at 33:
We have no hesitation in upholding the conclusiveness of the provision in the absence of fraud. It would be a matter of concern if commercial people acting in good faith could not, in entering into a transaction such as this, achieve certainty by a written contract excluding liability for prior statements by one of them if that is what they wished to do.
[52] But, without in any way departing from that general principle, we consider that in this particular case, the s 4 analysis ought to be conducted at trial, and not on the limited material available to the Court on this summary judgment application. In passing we note that Brownlie, itself not a summary judgment case, involved a very different factual matrix from that arising here. There had been negotiations about a joint venture, exchanges of draft heads of agreement, separate legal advice on both sides, the insertion of an exclusion clause in the second draft of the contract prepared by the solicitor for the party seeking to avoid the effect of the clause, and a reading through of the draft exclusion clause at a meeting between the parties.
[53] We are satisfied that the question of the respondent’s entitlement to rely upon the exclusion clauses ought to be determined at trial and not at the summary judgment stage.
Fair Trading Act 1986
[54] It is unnecessary to devote separate attention to this aspect of the appellant’s proposed defence. The analysis under the Contractual Remedies Act and that required under the Fair Trading Act 1986 are largely co-extensive. For the reasons we have discussed, we conclude that the appellant’s proposed defence under the Fair Trading Act is also a matter which ought to be determined at trial.
The settlement agreement
[55] During the later stages of the negotiations, following cancellation and resale by the respondent, the appellant executed certain documents which, it contends, have brought to an end its liability (if any) to the respondent under the earlier agreements. The later documents were prepared and executed without legal advice; it is fair to say that the interpretation task presents difficulties.
[56] The documents comprise an agreement for sale and purchase accompanied by a document headed “Mutual Understanding Document”. The parties used the standard agreement for sale and purchase (REINZ/ADLS 8ed 2006). The vendor is Sonsram Development Holdings Ltd, a company associated with the interests of Mr Sami. The purchaser is the appellant and/or nominee.
[57] On the front page of the agreement, the property intended to be purchased is said to be described in cl 15.0. There is no such clause. The specified purchase price is $2,512,500. The stipulated deposit is $153,750. Against the deposit figure there is a reference to cl 17.0. Again, there is no such clause. Possession was to be given and taken on 28 November 2008. Although the agreement itself is undated, Mr Lal says it was signed by both parties on 12 November 2008.
[58] The following special condition as to finance appears on the front page of the agreement:
Any recognised financial institute sufficient to complete this purchase 03 working days from the date of this agreement.
[59] The finance condition is linked to cl 8 of the printed conditions, where cl 8.7(5) provides that:
If the condition is not fulfilled by the date for fulfilment, either party may at any time before the condition is fulfilled or waived avoid this agreement by giving notice to the other. Upon avoidance of this agreement the purchaser shall be entitled to the immediate return of the deposit and any other moneys paid by the purchaser under this agreement and neither party shall have any right or claim against the other arising from this agreement or its termination.
[60] The agreement was executed by Mr Sami, as director of Sonsram Development Holdings Ltd, and by Mr Dutt, on behalf of the appellant. The latter subscribed the initials “M.D” underneath his signature. This is presumably a reference to his status as managing director of the appellant.
[61] There is no reference in the agreement for sale and purchase to the Mutual Understanding Document. The latter reads as follows:
MUTUAL UNDERSTANDING DOCUMENT
Redhill Developments (NZ) Limited
And
SK Brothers Builders & Developers Limited
The following terms have been agreed between Redhill Developments (NZ) Limited and SK Brothers Builders & Developers Limited; specifically between Mr Arjun Sami and Mr Sunil Dutt both in their capacities of being Directors of their respective companies.
1.0The property address(s) and the legal description for the properties in the sale and purchase agreement mentioned here are →
Lot 3, 4, 16, 24, 33, 34, 40, 41, 71, 137, 141, 142, 143, 144, 194 at subdivision of Lot 2 DP 202512, Lots 90-96, 133-138 & 258-267 DP 309848 – 139 Kaipara Road, Papakura.
2.0The vendor agrees to cancel the agreement and all/any proceedings against SK Brothers Builders and Developers regarding two agreements dated 11th of September 2007 and 12th of September 2007 between Redhill Developments (NZ) Limited and SK Brothers Builders & Developers Limited &/or nominee for a total of 16 sections at Redhill Vista Subdivision.
Any legal proceedings will be terminated / withdrawn immediately upon successful completion of Finance clause in the agreement; for the purchaser of properties mentioned in clause 1.0 between SK Brothers Builders & Developers Limited and Sonsram Development Holdings Limited – where SK Brothers Builders & Developers Limited are the purchasers.
3.0The vendor will reduce a sum of $153,750.00 from the total purchase price of this agreement. This $153,750.00 was paid as deposit for two agreements dated 11th of September 2007 and 12th of September 2007 between Redhill Developments (NZ) Limited and SK Brothers Builders & Developers Limited &/or nominee.
This amount of $153,750.00 is treated as deposit for this agreement between Sonsram Development Holdings Ltd and SK Brothers Builders & Developers Limited &/or nominee.
4.0The vendor agrees that the vendor will deduct a sum of money from the purchase price. This sum to be calculated for 4 months at the interest rate that the purchaser will get the money from the bank to settle the properties mentioned in clause 1.0.
5.0The vendor and the purchaser agree that if due to some unexpected problem the settlement of the properties in clause 1.0 gets delayed; neither the vendor nor the purchaser shall get into any legal litigation against each other.
Both parties agree that they will resolve any conflict(s) that may arise – mutually. The deposit will be forfeited if the conflict(s) cannot be resolved.
This condition is inserted to maintain long term relations between both parties.
‘A Sami’
As director Sonsram Development Holdings Limited
‘S Dutt’
As director SK Brothers Builders and Developers Limited
‘A S Pannu’
As witness – 7 Reeves Road, Pakuranga, Auckland
[62] Mr Futter, who argued this aspect of the case for the appellant, suggests that paragraphs 1.0, 2.0 and 3.0 of the Mutual Understanding Document must by necessary implication be regarded as the paragraphs 15.0, 16.0 and 17.0 referred to in the agreement itself. Although there is some correspondence of subject matter, the implication is not obvious. For the purposes of the present appeal it is unnecessary to resolve the point.
[63] The Mutual Understanding Document purports to be an agreement made between the parties to the present appeal. The respondent was not a party to the agreement for sale and purchase. On the other hand, Sonsram Development Holdings Ltd, the vendor named in that agreement, is not a party to the Mutual Understanding Document. The distinction was not lost on Mr Sami, who, when executing the latter document, crossed out a reference to Redhill Developments (NZ) Ltd immediately below the point on the document at which he had signed, so indicating that he signed as a director of Sonsram Development Holdings Ltd, but not of the respondent.
[64] The upshot is that the Mutual Understanding Document has not been executed by the respondent, which is purportedly a party to it, but it has been executed by Sonsram Development Holdings Ltd, which is not a party named at the commencement of the Document, nor a party to the agreement for sale and purchase.
[65] We agree with the Associate Judge’s finding that the respondent was not a party to the Mutual Understanding Document, which is therefore not binding on it.
[66] The next point is that the agreement for sale and purchase was, on its face, conditional upon the raising of finance within three working days of the date of the agreement. Finance was not arranged. By letter dated 12 December 2008 the respondent cancelled the agreement for failure of the condition. We agree with the Associate Judge’s finding that, on this separate ground, the appellant is unable to rely upon either the agreement or the Mutual Understanding Document.
[67] There is a further factual dispute which casts doubt upon the status of the Mutual Understanding Document. Mr Sami’s evidence is that the document produced to the Court by the appellant is not the document signed by him. He says that he made a number of changes to the draft agreement presented to him for his consideration, and that he sent the amended draft back to the plaintiff in the hands of Mr Pannu, an Auckland real estate agent, who corroborates Mr Sami’s evidence.
[68] Mr Pannu said that Mr Sami initialled all of his changes; that he, Mr Pannu, took the amended agreement back to Mr Dutt, but that Mr Dutt did not accept Mr Sami’s alterations or provide any counter-offer. These contentions would need to be tested at trial. We note that Mr Sami’s initials do not appear on the first page of the version of the Mutual Understanding Document produced in evidence, nor does the first page bear any of the amendments to which Mr Sami and Mr Pannu refer.
[69] However, for the reasons already given, we are of the view that the appellant is unable to rely upon either the 12 November 2008 agreement for sale and purchase or the Mutual Understanding Document, and that they do not give rise to an arguable defence.
Decision
[70] We consider that the appellant has an arguable defence to the respondent’s claim, insofar as it relies upon Mr Sami’s alleged misrepresentation of 9 September 2007.
[71] The appeal is accordingly allowed. The order for summary judgment is quashed and the proceeding is remitted to the High Court for trial. The respondent must pay costs to the appellant for a standard appeal on a band A basis and usual disbursements.
Solicitors:
Dawsons, Auckland for Appellant
Minter Ellison Rudd Watts, Auckland for Respondent
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